Sara Barba of Integer and Jorge E. Castro of Miller & Chevalier Chartered write about the decline in charitable giving and how lawmakers can advance legislation to help reverse it. This is an excerpt, and the full piece from Bloomberg Tax can be read here.
Critics of a universal tax deduction often claim that a more accessible charitable tax deduction would reward taxpayers who already donate or wouldn’t necessarily lead to more giving. These notions are misguided, and history and research tell a different story.
First, the argument that this incentive would be a windfall for high earners could be applied to any of the dozens of incentives in the tax code, and it ignores the overall policy rationale.
Second, the claim that it wouldn’t spur charitable giving flies in the face of decades of academic study. According to the Lilly Family School of Philanthropy, charitable giving has negative elasticity. That means when the price of giving goes down, the amount a donor is willing to give increases—exactly what an enhanced tax incentive is meant to capitalize on.
It doesn’t take a graduate degree to recognize that tax incentives exist because they work. If they didn’t, we’d save a lot of federal revenue by removing them from the tax code with little economic consequence. This then raises the question: Is the charitable giving of the roughly 10% of taxpayers that itemize more important than that of everyday Americans?